Greece’s finances may be battered, so why is the country encouraging a controversial alliance with Israel? With a regional war on the cards for 2011 and Israel in search for allies, the burgeoning Greek-Israeli relationship features sophisticated airborne weapons systems, intelligence collaboration and the discovery of an enormous potential energy supply in disputed waters. Could the eastern Mediterranean be the next battlefield in the proxy war between Turkey, Israel and Iran?

ISTANBUL: A new eastern Mediterranean front has opened in the regional strategic conflict being waged between the US and its allies on one side and a loose alliance of actors including Turkey, Iran and Syria on the other.

The new alliance with Israel was midwifed last year in Russia during a reportedly chance restaurant encounter between Greek Prime Minister George Papandreou and Israeli Prime Minister Benyamin Netanyahu. Russia’s Gazprom petroleum conglomerate was already eyeing the enormous energy reserves that had just been discovered under the eastern Mediterranean, estimated at 4.3 billion cubic meters of petroleum and a staggering 16 trillion cubic meters of natural gas. Fittingly, the field was named Leviathan.

The Greek-Israeli rapprochement was then nursed last June, after the bloody Israeli interdiction of a humanitarian flotilla headed to Gaza. Greece’s half-American prime minister is an admirer of the Jewish work-ethic and maintains advisers such as Nobel prize-winning economist Joseph Stieglitz. He exchanged visits with his Israeli counterpart over the summer even as he continued trips to countries such as Libya, courting Arab investment. As the number of Arab tourists in Turkey surged to over a million last year, Israeli arrivals in Turkey plummeted. Many followed the example set by their prime minister, who endorsed the new ties by taking his family on holiday to the Greek islands.

Now Israel is looking to extend a pipeline across the Mediterranean to Greece and jointly exploit Leviathan. Extending all the way from Israel’s coast to Cyprus and including portions of Egypt’s and Lebanon’s territorial waters, it is the largest deepwater natural gas deposit to be discovered in a decade. As regional tensions mount, the UN turned down a Lebanese request to resolve the dispute, the Iranian ambassador to Beirut declared that three quarters of the field belong to his host country and Turkey’s foreign minister refused to recognize a maritime border delineation agreement between Cyprus and Israel that would open the way to drilling. As state-owned Russian monopoly Gazprom shouldered its way into the fray, all the ingredients for the next regional conflagration clicked into place.

The energy-related tensions do not end there. In November, Turkey dispatched two oil-exploration ships into disputed eastern Mediterranean waters, prompting protests from Greece. In a traditionally tense region where Greek and Turkish fighters engage in daily mock dogfights, the potential for escalation is huge. An ongoing court case in Turkey charges members of its military with planning to foment a war with Greece as a pretext to carry out a coup against the incumbent government.

From a Greek perspective, engagement with Israel could attract Israeli investment and technological knowhow to its moribund economy, secure sophisticated arms-sales and win over an influential protector that can act as a foil to a newly-energized Turkey eyeing energy deposits in the Leviathan field and the Aegean Sea.

“Papandreou wants to attract the interest of Israeli business in the Greek economy and perhaps attract US business through Jerusalem,” said Sotiris Roussos, the head of the Center for Mediterranean, Middle East and Islamic Studies at Greece’s University of the Peloponnese. “He also wants to reintroduce Greece as a player with specific natural interests in the eastern Med.”

Greek-Israeli trade, currently approaching half a billion dollars a year, is increasing by 12 percent annually.

Tehran also seems perturbed. On a visit to Greece last December, former Iranian Foreign Minister Manuchehr Mottaki offered Greece the status of “favored partner.”

But his words “were more rhetoric and flattery than structured plan,” said an informed Greek foreign ministry official. Mottaki offered no details of what Greece would gain in return for arguing Tehran’s corner in Brussels.

“We very politely said we would consider their offer and left it at that,” the official said, who also revealed that an Iranian embassy official had been caught trying to assess Athens Airport’s security procedures as a “NATO-standard international airport.”

In the same month as Mottaki’s offer, an Israeli delegation was in Athens to discuss “a new military partnership in the Mediterranean” while a Greek military official visited Israel, tasked with purchasing unmanned aerial vehicles and weapons systems for Greece’s F-16 fighter jets.

Greek-Israeli military ties were warming-up years before the political rapprochement. In 2008, Greece earned Iran’s ire when it opened up its airspace for Israeli fighter jets to train for a possible long-range strike on Iranian nuclear facilities. Greece’s Russian-purchased S-300 air-defense system is similar to Iran’s.

“Tel Aviv is in need of air and naval space for the conduit of its military maneuvers,” said Ioannis Michaletos, a terrorism analyst, “and the Aegean and East Mediterranean is considered an ideal space for any kind of military exercise due to the challenge that islands and mountain ranges pose to any modern jet or radar equipment.”

The Greek media has been split over the new strategy, with one portion regretting the conclusion of a thirty year pro-Palestinian policy (Greece was the last western country to recognize Israel) and another appearing optimistic over where the new ties can take Greece.

“Any foreign attention is welcome,” said Amnon Sella, professor emeritus at the Hebrew University. “I can imagine that significant ties may evolve in the future.”

Until the Nazis occupied the northern Greek port city of Thessaloniki, it boasted Europe’s largest Jewish community of immigrants taken in by the Ottoman Empire after the horrors of the Spanish Inquisition. But Greece held out from opening an embassy in Israel until 1990 against a background of anti-Israeli and pro-Arab political rhetoric championed by former Prime Minister Andrea Papandreou, the current prime minister’s father.

With a fresh Middle Eastern war widely expected in 2011, Israel is anxiously seeking out new allies in an ever more hostile region. Netanyahu warned Papandreou during their private meeting that Turkey has the capability and intention to acquire a nuclear arsenal. But an alliance with Greece that would also bring Israel closer to Cyprus would see Israeli and Turkish fighter jets eye-to-eye on the disputed island’s airspace.

Some Greek Cypriots view the prospect of a regional face-off with glee.

“The current climate supports the development of a powerful tripartite alliance between Israel, Cyprus and Greece, to which it would be wise to include friendly Egypt which has many reasons to be worried about Turkey’s neo-Ottomanist imperialism,” wrote Savvas Iakovidis in the Simerini daily.

Calmer voices such as Roussos, caution that “Greece has not the resources for a significant role in the Mediterranean. Its political elite is too absorbed by the IMF directives and badly injured by extensive corruption allegations to undertake initiatives regarding the Middle East.”

Under the new agreement, Israeli intelligence services are expected to expand their already significant presence in Greece, a country that hosts over a million mostly Muslim immigrants seeking to reach the northern European Union and has become a potential center for Islamic radicalism.

“Significant Iranian interests such as the presence of Saderat Bank and a large Shi’ite immigrant population prompt Tehran to direct intelligence cells to monitor dissidents in Athens,” said Michaletos. “The Israelis will also be interested in the Hezbollah cells operating in Athens, the strong business links with Beirut, ELPE’s (Greek Petroleum) purchase of Iranian oil and the speculated funneling of Iranian capital flows through Dubai to Greece by Greek-Arab banking interests.”

“You can be sure that Israel has considerable Mossad assets in Greece,” said Philip Giraldi, a former CIA analyst, “but it is more interesting still that they might be angling for some kind of energy deal.”